Blog

The Federal Reserve District (Chicago) has released its survey results of farmland values for the second quarter of 2016. Overall land values have decreased by 1% from the second quarter of 2015.The ranges of the different reported states are; Iowa ranged from -3 to -10%, Illinois +7 to -3%, and Michigan, Wisconsin, and Indiana all having insufficient data and possibly remaining static.

The June rally for soybean and corn prices was great, but farmers (and bankers) are looking at a record corn harvest and a near-record soybean harvest. It’s up in the air where the commodity prices will land, but it has a heavy cloud over it at this point.

Fannie recently announced in the Selling Guide Announcement SEL-2014-16 that the 15% net and 25% gross adjustment guidelines were eliminated. Fannie Mae also clarified their expectations for the appraiser to analyze the market for competitive properties and provide appropriate market based adjustments without regard to limits on the size of the adjustments.
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Compliance is costly, but it’s more critical to the bottom line than ever before and can save lenders big dollars in regulatory scrutiny. Strict Fannie/Freddie requirements are forcing many lenders to identify and eliminate mistakes in home loans. 

A community bank should be aiming for a loan defect rate of just 1%.  That means just 1% of the bank’s loans would be considered high risk (unable to be sold to Fannie/Freddie).  There was a time when a 10% number seemed reasonable to most bankers, but the GSE’s are demanding that lenders produce higher quality loans with few mistakes.  

The ICBA Independent Banker had an impactful article in June of this year.  It was titled ‘Secrets to Steady Success’ by Kevin Tweddle of Fiserv.  Fiserv conducted a study that reviewed the performance metrics of more than 5700 community banks in all asset sizes.  This study examined these banks’ risk-based capital ratios, growth rates, return on assets and return on equity over a five-year period. As Kevin Tweddle stated ‘The results were surprising, as only 266 banks, less than 5 percent of the banks analyzed were good enough to be classified as a Proven Performer bank.”  

This study found that strong and growing banks fulfilled four key attributed: a low-cost foundation, revenue efficiency, above-average lending growth and high-quality loan assets.   

The Consumer Financial Protection Bureau released a guide to completing TILA-RESPA integrated mortgage disclosure forms.  The guide complements the recently released Small Entity Compliance Guide and highlights common situations that may arise when completing the forms. The TILA-RESPA disclosure changes take effect August 2015.  Find the guide on the CFPB’s website, at www.consumerfinance.gov

The Independent Community Banker Association September magazine publication had a great article titled “Fee or Free?”  Trent Fleming, a bank consultant stated “Community banks have given away so much for so long they’ve spoiled customers.”

This summer federal regulators issued for comment a plan that would establish standards for states to license and supervise appraisal management companies.  This plan was no surprise as most states were moving towards compliance with the Dodd-Frank Act which requires states to license AMC’s.  Of the 37 states that currently license AMC’s there does not seem to be any need for changing their requirements as all are within the guidelines of the regulatory plan. 

It is hoped that this will stimulate the remaining 13 states to set up their own licensing/oversight programs.  The new plan gives the states three years to set up the oversight program required by the Interim Final Rule of the Federal Reserve. 

The Consumer Financial Protection Bureau is in the complaint business, and business is good. The CFPB received 163,700 consumer complaints in 2013, nearly double the total 90,000 they received in 2012.

The CFPB’s Consumer Response Annual Report shows that the bulk of the complaints – a plurality of 37% – were related to mortgages.

Less time spent on appraisal mortgage compliance means more time with your customers

Worry list: CFPB compliance; USPAP/Appraisal Standard compliance; Inter Agency compliance; firewall between loan production staff and real estate appraiser; Fannie/Freddie cram downs; customary and reasonable fees; RESPA compliance; documented quality control/appraisal review; vendor maintenance; HELOC evaluations; and commercial appraisal order management/review.

Yes, it looks like the pendulum is swinging again, this time with changes that may allow more loan applicants to qualify for their mortgages.  A recent Consumer Financial Protection Bureau study found that some consumer’s credit ratings were being unfairly penalized for paid and unpaid medical debts.  As a result of this study, FICO, the most used credit-scoring system, announced they were changing some of their criteria.  This should allow some borrowers scores to change significantly over this next year. A borrower whose only major issue is an unpaid medical bill could see their score improve by 25 points. It will be a long process and will take time, so those borrowers should be patient before moving towards a purchase of a home.